Amazon, Cloud Rivals Dive Into Generative AI

"Tech giants are touting new artificial-intelligence tools that they say will revolutionize work, learning and creativity. They also have something else in mind: rejuvenating sales in their cloud-computing businesses.

The three largest cloud companies -- Amazon.com Inc., Microsoft Corp. and Alphabet Inc.'s Google -- have put the potential of new, so-called generative AI at the center of their sales pitches to try to capitalize on the explosion in interest in applications like the viral chatbot ChatGPT.

That chatbot was unveiled in November by OpenAI, a startup in which Microsoft has invested billions of dollars and has wowed users with its ability to perform functions like drafting memos and producing computer code at near-human levels of sophistication.

Microsoft Chief Executive Satya Nadella has made presentations at sales meetings in the company's Redmond, Wash., headquarters and New York office on how companies can increase efficiency using AI through its Azure cloud, said people familiar with the matter.

Google said this month that it would sell access to one of its largest AI programs, the Pathways Language Model, to software developers using the company's cloud services. Its customers will be able to use it to create things like customized chatbots or tools for summarizing webpages.

Both Microsoft and Google also have said they are injecting the chatbot technology into their office productivity software programs like Microsoft Word and Google Docs.

The generative-AI push is happening as companies are dealing with sharply slowing growth in the cloud-computing businesses that have been major growth drivers -- and, for Amazon and Microsoft, profit centers. Analysts are expecting combined cloud revenue for the big three companies to be up 18% this year. That is down by almost half from the growth they had last year.

Amazon Web Services, the largest cloud provider, reported sales growth of 20% last quarter, its lowest on record. Amazon.com said earlier this month that it would be laying off 9,000 workers across the company and highlighted its cloud computing division as a target of the cuts.

Microsoft, which ranks second behind AWS, has been warning investors its cloud business is slowing. Mr. Nadella has cited customers limiting their spending on cloud computing to save money.

The cloud providers are pairing free-service promotions with aggressive pitches from sales teams to target current and prospective customers who are starting to use generative AI. While tech companies have long centered their pitches on the latest trends in technology, there is optimism generative AI can usher in a new era of cloud growth.

Google said its AI software offering -- previously only available in-house -- will initially be available for select customers through its cloud and others can join a wait list.

"AI is going to be a big market opportunity," said Thomas Kurian, CEO of Google Cloud Platform. "We are in the very early stages of it."

Judson Althoff, the chief commercial officer at Microsoft, said that he views AI as an accelerant for customers to migrate more of their systems to the cloud.

"You're seeing a ton of energy from the Microsoft sales force because this leap forward in generative AI is real," Mr. Althoff said.

KPMG LLP has been slashing the growth of its spending on cloud computing in recent quarters. But as it started working with Microsoft's Azure OpenAI program, which lets companies incorporate OpenAI's technology into their own products, it realized it would be increasing its spending on AI services, said Brad Brown, global chief innovation officer for tax at the accounting firm. "AI is the much-needed tailwind many cloud companies have been waiting for. It will drive consumption," he said.

Smaller AI startups are potentially big new customers for cloud providers because they need large amounts of computing power to develop and run their apps. About 10% to 20% of the revenue brought in by generative-AI apps goes to cloud companies, mostly to the largest three providers, according to estimates from the venture-capital firm Andreessen Horowitz.

The providers are trying to entice startups by giving them a free initial taste of their services. Google has more than doubled the amount of free credits it gives to new AI startup customers, now covering up to $250,000 in spending for their first year.

Amazon plans to offer some AI startups up to $300,000 of free computing resources for signing up to its cloud as part of a new program for generative-AI startups, said people familiar with the matter." [1]

1. Amazon, Cloud Rivals Dive Into Generative AI
Dotan, Tom; Kruppa, Miles.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 28 Mar 2023: B.1.